Getting your pricing strategies right can be one of the most important factors to gross profit in your business.

It’s worth it to read up on pricing strategies and chose the one that best fits your business model. Some businesses don’t understand how important pricing factors into their overall sales. Changing from one pricing strategy to another can have a big effect on your revenue.

Skimming pricing

If you’re releasing a new product or service, you’ll want to take a glance at the price skimming strategy. Essentially, your business sets the price high and gradually decreases it over the next few weeks or months. The idea is that some people are willing to pay different prices for the same product. With this strategy, the people who can afford it will buy your product immediately despite its relatively high price.

Penetration pricing

Penetration pricing is the exact opposite of skimming pricing. With penetration pricing, you set the price of a new product or service low and then gradually raise it over time. The point here is to show people the value of your product without them having to make a big financial commitment. Once the price is higher, they may even stick around if they really like what you’re offering.

Optional pricing

Optional pricing can be implemented at any time. It’s very flexible and can be used by almost any business. With option pricing, you sell the same standard product and offer additional features at an extra cost. Another version of this is to sell different variants of a similar product at different prices based on their features.

Cost-based pricing

Cost-based pricing strategies are when you charge what you can based on the total cost of the product. Businesses implement this strategy when the cost of their product changes from time to time. In this case, you’re essentially passing prince increases on to consumers.

Cost-plus pricing

If you’re not sure how much you’ll be able to charge for your product or service, cost-plus pricing is a good place to start. You can do this by charging an additional percentage of the total cost of your product. For example, if your product has an average total cost of $100 and you want to mark it up 10%, you’ll charge customers $110.

Psychological pricing

Perhaps one of the best ideas ever in marketing, psychological pricing strategies have probably gotten the best of all of us at least once. Just take a stroll down an aisle in the supermarket and look at all the prices: $4,99, $9.99, and $14.99. In some cases, the same product will sell at a higher volume at a higher price just because it ends in $.99.